One of my first consulting engagements involving “insight” rather than operational execution, years ago, was for a large brewing company that people in Golden, Colorado would recognize immediately. We’ll call them Brewer C (at that time, the domestic brewer’s alphabet went A,B,M,C…). Brewer C at that time was third in domestic market share, trailing by double digits against the second largest in market share, in a business where selling involved spiffing large distributors so they would push more of your product. Think boondoggles like taking a customer to the boxing title fight at Ceasar’s Palace; the bigger the spiff, the better you did…

This brewing company figured out, trailing as they did in market share, that the two largest domestic competitors could afford a whole lot more spiffs than they could, so they needed a better approach. Considering this problem, they came to two conclusions: 1) beer distributors really like spiffs; and 2) while spiffs are nice, they don’t sell more beer, and beer distributors like selling more beer a lot more than they like spiffs. And so this brewer launched their “Go to Retail” initiative: pull more consumer demand for core product through distributors by helping them sell more beer.

It’s a great goal, but this brewer had a huge problem: they knew only at the aggregate level who was buying what, when, and where, because the only data THEY had was what distributors were ordering and paying for. They had NO data on what customers were buying, because this brewer like most brewers sells through non-captive distributors; they don’t sell any beer directly to you or I (their end consumers), and so the only data they have internally is their sales data to distributors.

They needed better data – they needed to know what retail outlets (bars, restaurants, liquor stores, chain stores) were selling to the end consumer (as an aside, it’s important to influence bar and restaurant demand, because most people try new brews by ordering a drink in a restaurant or a bar before they invest in a six pack at the local liquor store). So they negotiated for, and mostly got, invoice data of what retail outlets were ordering from distributors. Lots of data. Big data. But only data – this distributor customer number, this product number, this quantity, this price; hundreds of thousands of rows of data every week.

Data doesn’t inform, it only describes. Brewer C needed to be informed; the information they needed was which store (7/11 number 123, part of the 7/11 chain) was buying which product and packaging combination (e.g. Original in 6 pack cans), where was the store located, and what volume were they buying (and presumably selling) in a given period of time? So we overlaid multiple sources of data onto the core invoice data, to create this information. This informed Brewer C, but it didn’t tell them what they wanted to know – it wasn’t knowledge.

What Brewer C wanted to know – the knowledge they sought – was “how do we make the case for each retail outlet to carry more of our product: more volume, more varieties, more packages (some people prefer six packs of bottles, some prefer 12 packs of cans).” The data they had described a lot of transactions, and the information they now had told them which retail outlets were buying which products. But that didn’t help them with what they wanted to know.

“Knowledge” is created by experience bumping up against information to glean insights into the true nature of a thing (a goal, a challenge, an issue, a problem). That’s my definition, at least. So we worked with experienced beer salesman, mined the information we had to gain insights into patterns that mattered, then put that information and insight into the hands of a field sales force that worked with distributors to help promote Brewer C product. And that sales force did exactly what you would expect, now that they were armed with knowledge:

They went into local liquor stores and said “you are selling 10 cases of product XYZ per week; your competitor down the street is selling 100 cases per week. What do you want to do?”

They went into restaurants and said “you don’t carry Original, but liquor stores in this area are selling hundreds of cases of original every week. What do you want to do?”

They went to national accounts and said “your average store sells $200 of our product every month, but your best selling stores average $750 every month. If we pushed this product and raised your average store sales to even $350 per week, you would gross an additional $6.75M. What do you want to do?”

Not to be trite, but “knowledge is power.” In this case, it had the power to change the sales model for this brewer to focus on results rather than spiffs (although they still provide lots of spiffs), and generate more revenue by making the business case for carrying more Brewer C product. As pointed out by the CEO, this led to a significant increase in revenue for the company, and a greatly elevated stock price.

Data, and even information, are means to an end. The end itself is knowledge. What do you need to know to grow your business?

You’ve been a part of one of the most talked about startup stories of the last 10 years, presiding over a phenomenon in social networking unparalleled in its short history. Sure, everyone’s yammering on about Facebook – if my grandmother were alive, I’m sure she’d have a Facebook account, too. But the conversation around Twitter is materially different – you aren’t a glorified message board duplicating Google’s playbook; you’re at the tip of the spear of a god-damned, bona fide communications revolution!

But at this important inflection point for your business, you are in danger of screwing it all up. And that would free up WAY too much time for me, so I am writing this letter in hopes of helping you not screw it up, so I can keep all my imaginary friends and the illusion of popularity I currently enjoy.

So to kick things off, let’s be clear on what you are and are not. You are not a valuable technology company – your technology would be worth about 15 cents if it weren’t for the network of people that use your technology, and use it in a very committed way. You are a valuable information company, because amongst all of those inane, superfluous tweets about coffee, cute pictures of kittens, and @mashable retweets, real information is being shared and received. You are damn near to the 21st century what the Gutenberg printing press was to the Renaissance.

Your value, then, is that you ENABLE millions of people to communicate easily with each other, and share thoughts and ideas. It’s those interactions with each other that create your value; it is NOT your interactions with them, or companies’ interactions with them – that is just a re-warmed, soggy, and perhaps slightly moldy iteration of a broadcast metaphor. Yeah – I’ve seen the endless blog posts blathering on about how companies can create engagement and community with their customers; that is, after all, the “secret sauce” du jour of the social media pundits. The problem is, I don’t believe it, and neither should you – at least not for about 99.95% of companies out there. Can you build a community around Rolls Royce or Adobe? Sure. Around Campbell’s Soup? Not so much . . . and in any case, that sort of community, if it can exist, is not well served by your technology. The body of real evidence I have seen – keeping in mind we are still very early in the social revolution – is that the single most important reason people want a relationship with a brand is to receive promotional discounts. That’s it.

But because I’m sure you’ve convinced yourselves you have a strong and loyal user base, you might be inclined to monetize your network infrastructure the way early 20th century radio, and later TV, monetized theirs – by monetizing ears (or eyes). Yes, you could ALSO pull out the Google playbook, and insist that because you have such a large and committed user base, you are a great ad platform, just as Google – and then Facebook – have done.

There are a couple of problems with that position, though, the most important of which is this: people aren’t committed to Twitter. They are committed to a new way of communicating with each other in a very busy and noisy world – they like the micro-conversations they can have using these tools, and they like the ready access to information such conversations provide. You provide a non-spammy and very low cost way of having these conversations, in terms of time and effort. This communications pattern doesn’t lend itself well to advertising; in fact, the Twitter community actively attacks any efforts to turn it into an advertising medium. They didn’t call it a “Dick Bar” for nothing . . .

Also, because people aren’t committed to Twitter, per se, they aren’t committed to your website – more on that later, but suffice it to say for now that even if you have convinced yourselves you had a sustainable ad model, your prime ad real estate – your website – is the least effective way for dedicated users to use your service. In fact, your service lends itself better than any other social network to the mobile platform, and that platform is becoming much less about the unnatural grafting of web technology onto mobile, and more about mobile native applications . . . Um, iPhone and Android, anyone?

At this point you may be inclined to think I’m naïve – aren’t Google and Facebook making pretty decent coin on ad sales? Sure they are – which proves one thing: lots of marketers are looking for new ways to market, and are buying ads on those properties. Unfortunately, what no one seems able to prove is that those ads are better – or even as good – at generating new sales than more traditional marketing techniques. The hard data just isn’t there to support it. Will you make money if you can figure out how to do it? Probably. But at what cost?

You see, the value of Twitter is the quantity and quality of the interactions that travel over your technology. People “check out” Facebook, but those interested in being truly engaged go to Twitter – it’s micro-conversations with their friends and followers that count. These interactions need to flow freely to aggregate the value of millions of conversations – this is why ads are a really bad idea. They are a disincentive to participation: I personally believe if Twitter gets too spammy, there is a kid in a college dorm room working on its replacement (or could be in a very brief matter of time). The truth about marketing platforms, marketing “techniques,” is that they always decline in effectiveness – people avoid ads, or they tune them out. Given the very lean interface for Twitter? The only way to “tune out” is to “drop out.” That relatively small but hardcore group of committed users will go away, your ad rates will drop, and you’ll be the answer to a trivia question by 2020.

But you have to make money – I want you to make money, so that you keep offering me this phenomenal communications platform that reflects perfectly my sense of commitment to interactions with my social group: I love doing it, but I am not willing to regularly commit the time to an email, much less a phone call. With your platform, I can communicate much more frequently, in easily digestible bites: a win for me and my (highly suspect) time management skills, and a win for you, because you can capture and store those interactions to be mined later.

So what should you do, Twitter? Here are a few thoughts from a passionate observer.

Make it easy for people to connect with their existing relationships on Twitter.

Much has been made of the apparent fact that lots of people sign up for Twitter, but a very large percentage of those do not use it on a regular basis – most of the comments I hear on this point run along the lines of “I just don’t get it.” I don’t know about you, but when I go to a party, I am lost until I find a friend who helps ease me into the scene. The same is true of Twitter – it’s very clubby, and the best way to feel comfortable there is to start with a few good friends. If there is an easy way to find my IRL friends on Twitter, I haven’t found it; provide it, and get more people involved. And DON’T make me go to Twitter.com to do it – I couldn’t care less about Twitter.com.

Forget the web; mobile is where it’s at.

If I am sitting in front of a computer, focused on a computer screen, I am probably working, and therefore extremely unlikely to care about going to Twitter.com so you can serve me ads. I would guess a large, and growing, percentage of interactions on Twitter are via mobile clients (you actually have the data, if you wanted to prove it to yourselves). I am not going to a web page on my mobile phone – as great an idea as that sounded in 2005, the reality is that viewing web pages on a mobile device is painful. That’s why the number of mobile-native applications is growing and will continue to grow. A smartphone isn’t a stand-in for a computer while you’re away from your desk; it is a mobile computing device in its own right, with associated form-factor considerations not met by “mobile-izing a web page.”

There is an important corollary to this Mobile Computing rule: you will get my most honest, direct feedback about a company when I am actively interacting with it. I will say the service is great, or lousy, or that a product could be much more useful with additional functionality in the moment; it is highly unlikely that I will remember that feedback by the time I get back in front of my computer. Mobile computing enables spontaneous feedback, which I think best captures the true spirit of an interaction.

Leverage Tweetdeck as a “universal” client.

You don’t need a web page; you need a client – for a couple of reasons. The first is for the reason above – a client holds greater promise of providing a consistent user experience across platforms; the same is NOT true of a web page. The second reason is more important: as more people use the platform more frequently, the amount of information available will expand. While you have tens of thousands of followers, I would guess you are only following a few dozen. For the average frequent user, they are likely following hundreds. The key functionality of a good Twitter client – Tweetdeck, for example – is the ability to organize hundreds of people I’m following into special interest groups: I have “Inner circle,” “Sports,” “Social Media,” etc. – groups I manage through Tweetdeck, making the experience much more valuable to me. If I had to view everything in my stream all the time, the amount of time I spend filtering would make the effort far greater than the value of Twitter to me. Don’t make the mistake of confusing “you” for “your user;” seek to understand how committed users really leverage Twitter.

Channelize content.

Just as I filter content, you should “channelize” content. Organizations are using Twitter to pimp their news stories? Offer a news channel they can pay to belong to, and that users could mass follow – users easily find news accounts; news accounts easily get followers. Everyone wins. By the way, promotional discounts could be another channel . . . (Die, Groupon, Die!).

Sell (sanitized) data.

You ARE Big Data about consumer behavior. Among all the drivel and banality are nuggets to be mined. Sell subscriptions to that raw data. If you tried it before, try again because you did it wrong: Google MADE its fortune in selling relevant access to information; they monetized that fortune by selling ads . . .

Create and sell datasets.

Not everyone has the capability to mine enormous amounts of raw data for relevant consumer insights. So help them. Create (sanitized!) data sets relevant to various interests – say, consumer electronics. Mine your data, pull relevant datasets, and provide preliminary analysis of that data. You could even begin selling subscriptions to analyst insights gleaned from those datasets. Stop thinking of yourselves as Google and Facebook; start thinking of yourselves as Dow or Moody’s or Barron’s.

The MarComm folks were the early adopters of social technology, and as communicators have to a great extent formed the Social message as a “media” message. It is much more than that. Social Media may be about using the social technologies as another way to market to people; Social Networking is about the willingness of the market to come together and interact with each other. And just as you find gas stations where lots of cars drive by, so too should companies find a way to be where their market is.

The Social Media pundits will talk about the need for a community manager to become the face of your brand on the social networks; I think companies should think about Social for what it should be to them – a new channel to interact with their customers. Not just to talk, but to engage in all the activities that lead to value creation in a company – sales, product development, support, etc. To do so doesn’t require a community manager, it requires routing and integration of interactions in the social sphere to the right people within the company, at the right time. Twitter could mine your data and route it to appropriate interfaces for the company to act upon – sales inquiries go to the sales group via the lead management system; customer service requests go to the customer service group via the request management system. There is a lot there, but suffice it to say that while the interfaces are more or less easy to implement, finding and then sending the right messages to the right interfaces is much more difficult. Twitter becomes a much more effective lead generation source than, for example, a list management vendor would be; it could better capture substantial customer feedback to support customer service and product development information than a community manager ever will.

Those are some of my ideas – perhaps you are thinking about some or all of them already. Perhaps you are thinking of even better ideas that are just around the corner. The “Dick Bar” and “Promoted Tweets” don’t qualify, in my opinion, but you may be on the verge of launching a “Deep Throat” project that will turn the social revolution on its head. But I can’t help thinking, from the outside looking in, that you are on a very fast and furious ride, with no one at the wheel. You have tremendous potential power and influence, and your value proposition isn’t “easy,” but the hidden value there is enormous.

That value won’t come from crossing out the Facebook logo on the Google game plan, and covering it with the Twitter logo, although I know it is easy and perhaps comforting to convince yourselves of that. And there are substantial operational challenges to what I suggest, not the least of which is distribution. I am sure your VCs are pushing you toward an ad model; I am sure marketers are banging down your door trying to get ad space so they can reverse their fortunes and perhaps use this “Social Media” thing to finally get a seat at the big table. But those of us that use Twitter are not your product; the information we provide via Twitter is. You need to think bigger, and better, to make the money you need to keep providing the platform we love.

Don’t screw this up for me, Twitter – I NEED my imaginary friends to keep what’s left of my sanity . . .

A social media guru walks up to a guy who just bought a beer. “How likely are you to buy a beer today,” said guru asks. “Umm,” says the guy, a look of complete confusion on his face as he glances down at the cold brew, “pretty likely, I guess.” What can we conclude from this interaction? The act of social media gurus asking questions leads to buying beer. It’s quite clear from the evidence at hand.

Wait! did my logic go astray there? Yeah, it really did. I somehow totally confused “Cause” and “Effect.” As this is a blog, though, and therefore somehow social media-ish, I am making one of a couple of Cause-Effect mistakes that many in the social media world make – the other being that they assert causes, without any clear idea of what effect said cause, well, caused.

This is, by the way, the same mistake I would suggest many of the social media pundits make when trying to explain the importance of someone “liking” your Facebook page. I read a well reasoned article this morning about Facebook “like” research that again outlined many of the arguments I have seen before about the value of Facebook likes for brand pages – people who like a brand’s fan page are more likely to buy that brand, and to recommend it to their friends, etc.

Well, yeah . . . but that’s not the question.

The question is, did these users buy the brand because they “liked” the page, or like the page because they are loyal to the brand? The author used the example of Adobe’s efforts: their ability to develop a very active community around their Facebook fan page was offered as a best in class example. Of course, for many, many years – dating well before Facebook – there has been a fiercely loyal community around Adobe products. I would assert that all Facebook has done is offer another way for those fiercely loyal brand advocates to be . . . fiercely loyal.

That, and one other thing, actually. Facebook also makes it very easy for Adobe fans to share their loyalty with other friends – friends who may be from another sphere of the Adobe advocate’s life, or uninitiated in the magic that is Adobe. And therefore, Adobe’s brand page perhaps – PERHAPS – becomes a source of new sales leads for people who are not already buying and using Adobe.

I am 99% sure there is a Ford Focus fan page, and about 95% certain I am somehow connected to someone who is a fan of that page. That page may show up in my feed. I may see it. There is no way in hell I am going to “like” it (with the obvious caveat that I will do just about anything for payola and / or schwag). Why? Because there is no way I am going to buy a Ford Focus.

But might there be non-Ford Focus owners out there that will like the Ford Focus page (perhaps because they have friends who are Ford Focus drivers that liked the brand and shared it with them), and that some may actually be led to buy a Ford Focus? My sense says there probably is – I’ve just never seen any proof of that (or even any attempt to prove that; it may be there, but I haven’t come across it). The study above certainly does NOT prove anything of the sort.

Does that mean it can’t be proven (or disproved)? Of course not. The scientific method is based upon developing a hypothesis, and then designing experiments to prove or disprove that hypothesis. So to answer the real question at hand is, I think

Hypothesis: That the accumulation of Facebook “likes” on a Facebook brand page will have some measurable influence on new customer acquisition and repeat purchase behavior for some segment of buyers, and that this influence will vary by market segment and product category.

Norm Abrams is my hero. He sets a few pieces of wood on his workbench, and over the course of a half hour show, turns it into something wonderfully, and soulfully, crafted. He circles the work, bringing pieces to it to turn, for example, the odd piece of cherrywood into an ornamental bead; every once in awhile, he’ll even modify his design to accommodate a particularly interesting texture in the wood.

Contrast this with a large factory, where huge machines – stations – are arranged, with narrowly defined corridors between them, delineated in yellow and black tape, where material is moved from one to the next in succession to created a finished product. “Done with rough cut? Send it to extruding . . .” (“extruding” is a very funny word, by the way). For lots of reasons it turns out that sending the product to the work is much more efficient than sending the work to the product; over the course of nearly two centuries, the craftsmanship of a product has been sacrificed for the sake of the efficiency of its manufacture.

This is a big piece of what was lost in the industrial revolution – the soulfulness of a product, built in through the skill and love of a craftsman. We as an economy turned our attention to the process, rather than the product, so we now create soulless products very efficiently, rather than soulful products with the care they deserve. Not all of this is bad – I could care less about the craftsmanship of my toilet paper or light bulbs, but I do care about the craft embodied in my home, or my furniture, or my wife’s jewelry. I honestly feel this is a great loss for all of us.

Craftsmanship, however, is not the only casualty of the industrial revolution. We’ve also industrialized our customer relationships.

What does “industrialized customer relationships” mean? Much like putting a car on an assembly line, moving from workstation to workstation, we also put our customers on metaphorical assembly lines, moving them from marketing, to sales, to finance, to customer support. We have built functional silos within our companies that reflect a focus on activities that make sense to us internally, rather than focusing on what our customers need from us and how we can best deliver it. A great example is embodied in IVRs: in order for a company to more “efficiently” interact with customers on the phone, it provides a phone number, answered by a machine, that asks the customer to figure out what they need, then pick an option so that we can “send them to” the functional silo that makes most sense to the company. Yes, we’ve even co-opted assembly line vernacular to talk about customer relationships.

The differences between a living, breathing customer and a 20 foot roll of cellulose bound for rough cut are many and varied. A roll of cellulose, or a car, or a widget of any sort has no opinion about where it goes next, or how it gets there. Because a widget is carried, oblivious, along a narrow path from station to station, it has no need to try and understand how your company carries out its work – it neatly fits into the next station, unconcerned about where it ends up. A customer, on the other hand, may not know exactly which functional silo they fit into best, no matter how many options you give them on the IVR (and they certainly don’t want to listen to more than a few choices anyway). More importantly, a customer may need many things from your company, all in the same call – a little sales help, a little support, a touch of a sympathetic ear as they vent. You train your staff to do one thing well; unfortunately, you can’t train your customers the same way.

Most importantly, though, is that if your staff is waiting to receive a customer in their preconceived ways – based on their tightly written job descriptions – as a machine would await a widget, they are only listening for what relates to their job. And therefore they will miss, and your company will miss, that subtle nuance of texture a customer can often bring to your company – a compliment, a process improvement, an idea. These ideas, compliments and even complaints are critical to your long term success.

Because at the end of the day you don’t succeed or fail as a company because you offer products (at whatever price); you win because your customers buy them, and come back to buy them over and over again. Thought about correctly, you create products only for their transitive value to you; the long term value you are trying to create is to gain, and retain, customers willing to buy from you.

“Trust me” is a counterproductive statement: in most cases the only people who use it are the people you should worry about trusting. The phrase also puts an interesting spin on accountability – it’s up to you to take it on faith that whatever needs to get done is going to get done; “trust me” is a platitude, not a promise. Perhaps this is why Reagan famously said “trust but verify” – he may have wanted to believe the Soviet Union was going to reduce their nuclear weapons stockpile, but the stakes were too high, and the free world wasn’t going to accept the USSR’s platitudes.

Now, I’m not in general a fan of Reagan, but I think he understood quite a bit about accountability and the stewardship of “Very Important Things.”

In business, Very Important Things include revenue, expense, profit, shareholder value. These are measures of financial performance. I believe in financial measures because they are unambiguous, and everything a company does is ultimately reflected in its financials: sales, expenses, even intangible assets are accounted for with something called Goodwill (the value of a company in excess of its book value).

When marketers say you can’t directly measure the value of marketing, well – you can. Apple is worth something north of $320 billion in large measure because of the asset value of the intangibles of 1) its brand identity; and 2) the probability of future revenues. Beyond tactical promotion, these are the strategic things that marketing is trying to influence; the importance of these intangible assets led McKinsey and Company to argue that marketing should be treated not as an expense, but rather as an investment.

Unfortunately, marketing doesn’t help McKinsey make this case when they insist that what marketing does is a Very Important Thing – BUT - what it does defies unambiguous measurement. That level of accountability doesn’t exist in traditional marketing – marketing has intentions, and goals, but it doesn’t have hard targets.

Marketing is at least partially correct, though, about the difficulty of measuring marketing as you would measure, for example, sales, in that what marketing does can’t be measured in the same quarterly and annual cycles as revenues or earnings. Sales has to generate revenue this quarter and this year; marketing may make investments that won’t pay off for 2, 3 or perhaps many more years.

The problem here is not that marketing can’t be measured; the problem is in understanding how to monitor and measure longer term strategic investments. This is a well understood problem. An overreliance on short term operating results – which happens when a company focuses solely on reporting financials on a quarterly and annual basis – leads to short term gains but often to a longer term erosion of value; a company may end up mortgaging the future of the company for next quarter’s earnings report. That over-reliance on the short term view led to the development of tools for planning and evaluating a company’s longer term performance against its strategic plan – one such tool is the Balanced Scorecard.

A balanced scorecard outlines a number of categories of activities aligned with the strategic plan of the company, with their weighted importance, and each category is supported by a series of metrics that measure performance in that category. Financial performance is inevitably the first category on the list, but others may be customer experience, loyalty, employee satisfaction, etc. The balanced scorecard is a great tool for reminding people who are deep in the trenches every day driving sales and ensuring products are delivered on time that there is a longer term strategy for the company, and that the strategy is much broader than the numbers reported to “the street.” It is such an effective tool, in fact, that often individual functions will create their own scorecards aligned with the strategic scorecard.

So what would a social business balanced scorecard look like? My social business scorecard might have these categories (consolidated across multiple functions; note I am not taking the narrower, more generic categorical view some practitioners promote, although each of the below could be rolled up into that model):

Revenue generation

Customer acquisition / Market share effects

Efficiency of customer support

Product feedback

New product ideas

Assurance of future revenues

Goodwill generation

Customer satisfaction

Employee satisfaction / “employer of choice”

Recruiting effectiveness

Retention of new hires

Internal knowledge generation / retention

Collaboration

New idea generation

I am sure there are many more that companies might consider critical to their social business success, and new capabilities and opportunities are emerging in the social space every day. The key here is that the balanced scorecard is developed to align effort with the strategic positioning of the company, monitoring and reporting performance balancing a company’s short term view with its longer term goals.

Social business strategy is only a Very Important Thing if it aligns with the strategic positioning and goals of the company, and the owners of that strategy are held accountable for its business results. This helps everyone with a seat at the big table to understand what they are getting for what they are paying – the CEO wants to do as much as he can to grow the value of the company; it’s up to you to show him how you intend to do that through your “social media strategy.”

Well, having spent 22 years in the business consulting world, I can make some assumptions with a pretty high degree of confidence. For example, assuming a utilization target of 75% for these consultants, it means they plan on this group of 1,000 consultants billing 1.5M hours per year providing social media expertise to clients. That may not sound like much for a global consulting firm – there must be many thousands of social media gurus, experts, ninjas or just practitioners out there. What is worth noting, though, is that these consultants will in all likelihood be involved in early phases of consulting projects joining Cap Gemini’s already large cadre of experienced management and business consultants; teams that will range from 4 – 6 people to well over a dozen people in early stage visioning, blueprinting and roadmapping engagements.

So those 1.5M hours become a part of a larger social business effort that will equate to between, say, 3M to upwards of 18M hours, annually, of social business consulting services; at blended bill rates of $125 to $200 per hour, that 3M – 18M hours of consulting a year will equate to $375M to as much as $3.6B in revenues for this approximately $11.5B company – to start. This is not Cap Gemini dipping their toes in the social business consulting waters – this is a heavy bet on what a lot of very smart people at Cap are obviously viewing as a high growth market. And the visioning, blueprinting and roadmapping engagements are only the tip of the iceberg in terms of overall revenues – implementation revenues these engagements will lead to will provide a hefty multiple to those figures. That is big business.

But those are just numbers – the broader story is much more interesting. The bigger picture is not about “social media” being the next marketing channel – the next ad, mailer, TV spot, billboard; it is about the social sphere as the next customer-facing channel. It’s not just a new way of doing the same old communications and marketing, it’s a new way of doing business – what many, including myself, have talked about in terms of “Social Business,” perhaps none more intelligently than Olivier Blanchard, in pieces such as “Social Business vs. Social Marketing: Understanding the Fight Over Content.”

I’ve had lots of conversations over the last couple of years with many friends and colleagues in the marketing and marcom services industry about the unique position I thought they occupied in the emerging social revolution. My hypothesis was simple: social business consulting was going to be the next great wave of business consulting, and because of the dynamics of the market, the people with the skills and experience to communicate directly with their clients’ end customers were in the spoiler position to lead that wave. I came to this conclusion because to lead in this consulting space, marketing and communications capability was a critical key to success, and the firms that led the last 3 or 4 waves of business consulting did not yet have those capabilities – they came from the accounting and operations side of the business, with hardwired relationships to CEOs, CFOs and key operating executives, but with little understanding of actual customer-facing contact.

I further hypothesized that there was a window for these marketing / marcom firms to exploit their lead in this space, and move beyond driving marketing messages to customers, and moving toward understanding how interactions in this space were simultaneously marketing messages, customer interactions, and sources of competitive intelligence. Marketing communications was an obvious use of this medium, but it was only the beginning of the social revolution.

So it seemed to me that one of three things would happen (and perhaps all three will ultimately occur in some form):

1) Marcom and marketing firms had a window of opportunity to expand their capabilities to move beyond “broadcast” marketing, and embrace the dynamics of a robust customer channel – they could, in effect, become the thought and market leaders in the next big business consulting wave;

2) Marketing / marcom firms would partner with business consulting firms to provide a broader set of services to address the needs of the business market for social business consulting services; or

3) Business consulting players would embrace this phenomenon, and use their very strong C-level relationships, understanding of organizational decision-making and change management, and their ability to address the People/Process/Technology issues of social business to gain entry to the social business consulting market, and own this latest wave the way they’ve owned the last 3 or 4 that I’ve been involved with.

All three scenarios entail diversifying capabilities, and probably more significantly, dealing with cultural differences; what is clear is that the business consulting (and related people/process/technology services) create both greater tie-ins for the client, and larger revenue streams for the services provider. I thought that the third scenario was inevitable, but would be slow to come, and would require a business consulting firm to embrace a whole new set of skills and sensibilities to enable the creative, communications aspects of this business. I thought the marketing and marcom firms had a first-mover advantage, and, if they could figure out how to move from sending out messages to embracing interactions, they had a great window of opportunity to take the lead.

I think Cap Gemini’s latest move, which is sure to be emulated by other large management and business consulting firms, is notice that the window of opportunity is closing for the upstarts, and that Social Business is about ready to become big business. They are hiring the social savvy resources they need to build a strong capability complemented by their many years’ of experience in implementing broad-based organizational initiatives, working directly with C-level and key operating executives, building strong business cases, managing change, and implementing not just programs, but supporting processes and technology to integrate those programs into the broader business.

In other words, Social Business is now all about Business. No more talk about a seat at the table with the CEO; no more talk about constrained resources; no more disconnects between disparate departmental initiatives. Cap Gemini (and others) are betting that Social Business will be a significant component of an over $700B industry for business consulting and related IT services.

And for those marketing and marcom firms that are still talking about community managers, Facebook fan pages and Four Square campaigns? Start thinking about partnerships to provide a broader range of services than you have traditionally provided, or be ready to see a great deal of revenue fly past you into the hands of Social Business consulting firms. Because the “social phenomenon” is NOT about media, and it’s not about messages; it’s about business.

A couple of weeks ago something happened that in my experience is unprecedented: I received bad customer service from Nordstrom. And in the way that situation played out, I gained some interesting insights into culture and communication.

I have worked with people from many different countries – Europe, Russia, India, China, Japan, Vietnam, Australia, Singapore, Hong Kong – the list goes on. Our business has always been transacted in English, and yet understanding has many times been elusive. While some of the difficulty arises from various accents and vocabulary -“commercials” vs. “financials” for example – much of the difficulty is rooted in culture. Words and expressions are given different weight and meaning depending on who you are talking to; even the patterns of speech vary – while probably a very broad generalization, Americans often make simple statements as strong assertions; Brits and Indians may turn the same statements into questions.

“But how, Kevin, does this relate to a poor customer service experience at Nordstrom?” those of you still awake may ask yourselves.

Well, I bought my wife a very nice suit and a pair of slacks at Nordstrom. A couple of weeks ago she needed the suit for an important meeting. She took the suit and slacks to Nordstrom for tailoring, and asked if they might rush the alterations. Nordstrom very expectedly said they could absolutely rush the order – no problem whatsoever.

A couple of days later I went down to pick up the suit. I didn’t have the ticket, but gave my wife’s name to the associate, and she went into the back, and brought back the slacks – not the suit that my wife needed.

I asked where the suit was; she replied this was the only item she had, and the ticket only listed this single item.

I said my wife had dropped off the slacks and the suit at the same time, and it was the suit that she needed.

She said the slacks were the only tailoring she had . . . and so on and so on for 10 minutes.

She finally started calling around to see if the suit was somewhere else; no luck. I persisted. She went and checked other areas, and came back with a floor manager. They finally discovered the suit was still waiting to be tailored. I explained to the manager my wife’s situation; the manager went away for 15 minutes, came back and said she had found a tailor that would rush the pants, and they would be ready in a few minutes (this within an hour of closing time on a Sunday, no less).

After an hour and a half, I had the suit (and slacks) in hand, well tailored and newly pressed. I thanked the floor manager for her help, and asked if I could have a private word with her . . .

And this is where the cultural aspects of communication came into play.

I made a highly critical comment to the manager about the associate who eventually solved my problem: while that associate ultimately persisted, it was quite clear to me that she only did so because I persisted – she would have been just as happy if I had dropped the subject and walked away.

And that highly critical conversation wasn’t a difficult conversation to have at all.

You see, I wasn’t dealing with a person who was taught to mouth customer service words like “I’m sorry” and “thank you.” I was speaking to someone who embodied the Nordstrom culture of customer service. She wasn’t sorry because she was told it is good to say”I’m sorry” – she was sorry because that’s not the way Nordstrom does things. There was complete alignment in our communication – not only were we speaking the same language, but the words we used had the same meaning and were given the same weight. I expected great service from Nordstrom; she expected that Nordstrom would not fail to deliver that service.

Tony Hsieh and Zappo’s became famous for the service they delivered. And I don’t recall Tony ever saying he built a script for great customer service – he built a culture of great customer service.

The same is true of Nordstrom, and because of that culture – and the alignment of communication enabled by that culture – the way a poor customer service experience resolved itself has actually made me a more loyal Nordstrom customer.

One of my “imaginary friends” on Twitter was arrested, charged and convicted of being a terrorist.

Oh. Did you want to know more?

Here’s the story. One of the people I have developed a friendship with on Twitter met a girl – since he is still going through the appeal process, we’ll protect his identity by calling him “Paul” (although Paul, is, in fact, his name). We’ll call her “Crazy” because, honestly, I think she’s crazy.

They tweeted, then did the Twitter equivalent of flirting (which for obvious reasons I would rather not call “twirting”), then started talking on the phone apparently late into the night, as only young people can when they begin to fall in love. Did I mention that Paul is in his late 20s?

Well, Paul and Crazy’s relationship progressed to the point where they planned on becoming a tad bit more “intimate” than Twitter generally allows – the difficulty being that Paul was a finance manager in some town in England called Doncaster (apparently near Sherwood Forest – we’ll talk more about that in a second), and Crazy is in Northern Ireland. So they made their plans to do all sorts of wonderful things together, and Paul planned a trip to Northern Ireland.

About a week before the planned trip, Paul’s local airport – Robin Hood Airport (Seriously? Do they take seats from the rich and give them to the poor?) – was closed due to snow. Paul, his young man’s hormones a raging torrent controlling his entire body, with the notable exception of his brain, tweeted the following:

This is, of course, the hormonally-charged, long distance relationship equivalent of “If you leave the coffee pot empty one more time, I’m going to kill you.” Now, Paul doesn’t know how to make a bomb; hell, he obviously can’t even make a decent joke. In a western world made hypersensitive to threats that in some form have always existed, this was a pretty stupid joke to make. But stupidity isn’t a crime.

Apparently, though, in the UK, under a law passed in the 1930s to protect switchboard operators (yeah – the Lily Tomlin kind), making “menacing” statements in public is. Seriously – if it weren’t for the impact to this young man’s life, I would find that absolutely hysterical. And the local constabulary, in their anti-terrorist vigilance, were monitoring the social networks for just such threats. And by “monitoring,” I mean someone tipped the coppers off to this tweet (and then had to explain to the coppers what, in fact, this thing called Twitter is); that’s right, Twitterverse – we’ve got a stoolie in our midst.

So Paul was dragged out of his office in front of his coworkers, his phone and computer were seized, and he was charged with menacing Ernestine the Telephone Operator. He was tried and convicted, and his latest appeal was denied; his statement was “obviously menacing” (apparently). He was also suspended from, and ultimately lost, his job, because finance managers, like bankers, are frightening enough without being convicted terrorists. His chances of getting a similar job, under these circumstances, are – ironically – about the same as his actually being able to build a bomb and use it to blow up Robin Hood Airport.

This truly violates my sense of proportionality and fair play (as I hope it does yours). Sure, pin a felony Stupidity in the First Degree charge on him, plead it down to misdemeanor Idiocy in the Third, slap him on the wrist, spank him on the bottom and let this kid get on with his life. That’s not what the court did, though.

So the story takes another twist. A grassroots civil disobedience campaign began in support of Paul – #iamspartacus. The gist of it is that Paul’s original tweet, or variations thereof, were retweeted by some people. And by “some people,” I mean some 17,097 people in the last 7 days. The court’s response? They dug their heels in.

This should be a funny, funny story – the stuff of a 30 Rock episode. It isn’t funny, though; it’s tragic, in a ridiculous, silly and Orwellian way. But hey, I’m not a political activist; I’m a cold hearted businessman, and there are business lessons to take from this story.

The social revolution represents a fundamental shift in the way a huge percentage of the world’s population communicates with each other. This isn’t a “fad” – this is the 21st century’s equivalent of the early 20th century’s telephone.

The power of tens of millions of people communicating with each other on an almost continual basis in microbursts throughout their day is enormous.

The dynamics of business in this environment are changing, and they will effect you. Don’t use the business equivalent of 1930s-era laws protecting a now endangered species as the framework within which you deal with 21st century business.

If people are talking about your company, and they will, help them make positive comments. Make sure your “people, processes and measures” are aligned with creating positive buzz and word of mouth. If a negative comment arises, address it (and the root cause that created it).

Unfortunately, the Crown Prosecution Service has all the power in Paul’s case – at least the direct power. That is not true of your company and its relationship with your customers. You can do whatever you want, but your customers can overturn any ruling you make – and your competitors would love to collect those dollars on your behalf.

There is a social revolution happening. You simply can’t argue with the number of users of social media, and, much more importantly, the amount of time social media users spend being social.

Social Network Usage

These users are avoiding traditional communication channels like email and moving more and more communication to social networks; they’re avoiding ads on TV by surfing the web on commercial breaks; they’re forming opinions about companies and purchases from friends’ inputs rather than brand-dictated consumer marketing. If you tune into the social world, particularly the current pundits and thought leaders, they acknowledge, even revel in, the fact that this social revolution is occurring.

And the prognostications about the scope and magnitude of the fundamental changes to business this social phenomenon creates are as prolific as the fact-driven cases to support these assertions are scarce.

There is a social revolution occurring, and it is profound. The proliferation of “social networking” must, in my opinion, be considered a “disruptive innovation;” it doesn’t change the playing field – it moves it. And if you don’t move with it (assuming my prognostications are correct) then you are at risk of losing considerable ground to more nimble competitors.

But this social revolution doesn’t “change everything.” It actually doesn’t change many things at all.

Businesses are still in the business of making money. We have to spend money to make money; the less money we have to spend to make the money we want to make, the better. We don’t make spending decisions in a vacuum with the implied assumption of unlimited resources; we make hard choices in which of any number of worthwhile initiatives we might do, investing in those we think will provide the greatest economic leverage for each dollar we spend.

We still need customers to make money. The most expensive sale we’ll make is the first sale. We should always seek opportunities to cross-sell and up-sell our customers. A repeat sale is the cheapest sale we will make.

Happy customers lead to loyal customers. “Loyal” does not necessarily equal “profitable” – we have to find a way to make profitable customers loyal, and unprofitable customers either 1) profitable; or 2) go away. To do so, we have to understand how much our customers are worth – who the high value customers are, and who the customers are that are disproportionately expensive to have on our books. Doing so implies that we understand lifetime revenues, “influenced revenue,” and all-in costs for our customers.

Even the growing lexicon of social jargon describe well-understood ideas. Good executives and good sales people constantly seek to “engage” with customers. You spend money on launch events to reach “influencers.” TV ads where CEOs talk earnestly and sincerely about their companies are meant to embody “trust” and “authenticity.” Gas stations sit near highway interchanges and on major thoroughfares so you can “geo-locate” them. McDonald’s understood the value of “badges” years before 4square was even an idea (what, after all, is their “Monopoly” game but the collection of badges?). Civic groups, clubs, alumni groups, play groups are all “communities.” Soliciting customer referrals is “curated content.” Gutenberg started a “communications revolution.”

Yes, much of the mystique of the social revolution is just core fundamentals recast with different jargon. It has always been so in any period of innovation.

But innovation is rarely about 90 degree shifts in course; often the most disruptive innovations are just a few degrees off of the mainstream. Take Gutenberg, for example. He didn’t invent thought and reasoning, philosophy, religion. He didn’t invent narrative. Hell, he didn’t even invent books. What he did was invent a way to mass-produce books, and the implications of this few degree shift away from monks creating illuminated volumes to Gutenberg’s printing press – that one small change – led to a huge revolution in the availability and democratization of ideas.

It is the domino effect created by a 3 degree shift in thinking that results in a disruptive innovation.

So what is the three degree shift created by this social revolution? That shift is this: people now have the means to communicate with each other much more broadly, and more easily, than ever before. That’s it. That one thing. That one little thing.

Seriously? That’s it? Haven’t we for years been able to communicate easily with others via telephone and email? Well, sure – if you are willing to commit the 5, 10, or 20 minutes to the task; but certainly a 30 second update is much easier. And certainly you can communicate with a broad circle of friends via email – all you have to do is search through your contacts and add each address to whom you want to send the message.

With this social revolution, people are communicating more things, more frequently, because in 30 seconds they can update all of their friends – who may then forward that message on to their friends in just a few seconds. They may share mundane or inane things; they may also share needs, wants, likes, dislikes, reviews, content created by others (such as blog posts or videos).

And the domino effect from this 3 degree shift are potentially huge for businesses, particularly consumer-facing businesses, in marketing communications, but as importantly in customer service, sales and product management. And we think it would be foolish for businesses to ignore this one little thing, because it isn’t going away. No matter what the future holds for the social sphere as marketing / advertising platform or corporate communications tool, it will always be true that people are social animals, who love to communicate, and that the social sphere will provide an ever increasing number of ways to communicate more easily and more broadly within their social sphere.

And so it continues. Yet more posts about “social media ROI,” and more people self-proclaiming themselves ROI specialists. This seems to be a hot topic du jour of the social media pundits: having somehow connected their complaints of having no “seat at the table,” and frustration at a lack of resources applied to social media, to this ROI thing, they have now jumped on the bandwagon offering proof positive that every business in every industry MUST embrace social media because of its huge ROI!

Forget that much of this alleged “ROI” is a bunch of false metrics masquerading as proof of value. A “pundit” who shall remain nameless recently blasted the number of fans “liking” a Facebook page as a false metric for value. “Right on,” thought I. “Maybe this guy DOES get it after all!” He then proceeded to babble on about his idea of a “better measure” – the number of “active fans,” which he described with all sorts of speculative numerical justifications masquerading as proof. “Damn,” I thought. “There’s 3 minutes of my life I’ll never get back …”

Forbes recently ran an article on Forbes.com written by Patrick Vogt, CEO and Chairman of Datran Media titled “Facebook Fans Vs. Twitter Followers: Which Are More Valuable?” In this article Mr. Vogt outlines some interesting metrics about Twitter Followers vs. Facebook Fans. He also describes as a best practice example of a social media campaign Nike’s commercial “Write the Future;” according to Vogt, this commercial was commented on over 9 million times on Facebook, and viewed over 20 million times on YouTube. Great numbers, I’m sure, but he failed to mention what I would consider the most interesting number: what was the revenue uplift for Nike products based on this apparently very successful social media campaign? Perhaps the revenue uplift was enormous, or marginal, or non-existent; in any case, I think the CEO, rightly, wants to see that number.

It’s all about accountability, and this concept appears to be so foreign to so many commenting on this social phenomenon that they haven’t yet adequately embraced the vocabulary of financial accountability. A case study is not proof of ROI for your company’s social business efforts; it describes someone else’s historic ROI for theirs (which may, in fact, enlighten you to ways you may look to quantify the value of your efforts). I read a recent post from someone who wrote that “I think there are 3 more ROIs out there where you can build a great business case with Social Media.” A little hint? A business case is necessary to derive THE ROI for a given initiative, which describes the expected economic benefits of the effort. (Note that I am purposefully not naming this individual here because I think he has some interesting things to say, so I’d prefer naming him in a more positive light.)

So let’s forget about all of this financial jargon, and let’s look at it this way: when you ask a CEO to give his or her support to a “social media strategy,” think of it as asking the CEO to push a lever. The effort required to push the lever is the investment; the benefit that comes from having pushed the lever is the return. The CEO has a wide array of levers that can be pushed at any given time – convince him why he ought to push yours.

The most convincing argument is to prove that pushing your lever delivers as much or more economic benefit than pushing other levers. You can also argue that there are some other, non-economic, benefits to pushing the lever, and usually there are. But there MUST BE economic benefit in an initiative for the CEO (and his right hand man, the CFO) to buy into it. This is actually a wonderful test for you, as well. If you don’t see any direct financial benefit in what you are doing? Rethink the initiative as though you had to prove the economic benefit – how would you restate your case, and how would you design your initiative to prove its benefit (a little something called “financial accountability”)?

If, by reconsidering your initiative within the context of financial accountability, you can make concrete, well-supported statements about its economic benefit, you can gain the support of the executive suite; in this very tough business climate, smart CEOs are looking for strategies to drive their businesses forward.

BUT – if you cannot describe any financial benefit? You get $2,500 and an intern . . .

K

Author’s note: no social media pundits were physically harmed in the making of this blog post.